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Summary:

Peering may feel esoteric and difficult to understand, but here’s an example why consumers should care about how these interconnection fights play out between Netflix and ISPs.

When you’re curled up on the couch, set to watch the second season of Orange is the New Black, and the video stream pixelates or just stops, it’s the modern-day equivalent of the “all circuits are busy now” message one can still hear on landline phones (or one could, if people were calling on them). And the issues behind both problems are similar — somewhere in the network there is too much demand and not enough capacity.

But unlike the days of landline phones, when one industry controlled the calling experience (telephone companies that were forced by FCC regulations to connect calls on their networks), our broadband networks and the internet itself is controlled by varied industries and there are no rules around interconnections. This is why we’re seeing Netflix and various ISPs battling it out in the press.

The internet is a wild west

A video quality report from YouTube for my ISP.

A video quality report from YouTube for my ISP.

For much of the internet’s life this wasn’t an issue, but in 2014 as video takes over more and more of network traffic (and cuts into the ISP’s triple play bundle) ISPs have been pushing back against the large content providers like Netflix, Google, Amazon and others. Where in many cases U.S. ISPs (and most participants on the internet) have signed interconnection agreements that link the two parties’ networks together without one party charging the other, this is now changing.

Seeking control over what traffic gets on their network and another source of revenue, several of the nation’s largest ISPs have been engaging in negotiations to charge Netflix, and transit providers that carry Netflix traffic for the ability to directly connect to the ISP networks. This has led to both Netflix and ISPs to engage in behavior that has hurt consumers. We’ve detailed the problem here and here, and also explained why this is an issue that the FCC should investigate.

While the FCC, the tech press and a few other entities are paying attention to peering, it’s a hard sell for consumers, since it’s happening out of sight in data centers and requires and understanding of how the internet works. Other than bad Netflix, consumers may never see the issue. And bad video streaming could be caused by any number of things — from bad Wi-Fi to a server problem at the content providers end.

Plus, it can be even harder to understand why Netflix shouldn’t pay and why that might be bad for consumers.

A tale of broadband frustration

But I have a perfect example of why this matters. It starts at my cable box. Since the beginning of the year, my husband and I have had trouble watching Amazon or Hulu during prime time over our Time Warner Cable connection. The video streams would fail and we’d get messages on our Blu-Ray player telling us our connection was too slow. Yet, a check on speedtest.net would reveal we were getting at least 30 Mbps not the anemic 1.2 Mbps or .3 Mbps our player would show.

IMAG0666

TWC offered a software upgrade to our modem and was actually quite helpful with regard to sending someone out to fix the problem. While I’m well aware that any cable modem is a shared service, it’s ridiculous to think that someone paying for 50 Mbps would be content to get 1 Mbps. Time Warner agreed.

Unfortunately, the problems remained and then my modem would just drop offline for 15 minutes to as much as 2 hours. This was untenable and the cable guys came back out to eventually replace the coaxial cable on my entire street. While the problem with both intermittent service and the prime time video playback are still occurring, they have lessened. But my husband and I decided to seek an alternative to Time Warner Cable.

Show me the options

We live in Austin, which is often held up as an oasis of broadband competition with an existing gigabit network provided by Grande Communications, a soon-to-be-gigabit network from AT&T and another planned gigabit network from Google. But none of those are available in my Austin neighborhood. So our choice was TWC or AT&T’s U-verse with 24 Mbps down and 3 Mbps up.

Austin Google Fiber Launch

AT&T was cheaper, but it also is having an interconnection fight with Netflix at the moment — leading Netflix to say that AT&T’s Uverse speeds are slower than DSL. Since we watch a lot of Netflix and other internet video services (we don’t usually have cable in our house because we don’t watch much TV), AT&T would only fix one of our problems.

And what if Netflix hadn’t signed a peering agreement with AT&T, but Amazon had? What if TWC had a deal with Netflix but not Hulu? Then, here I am: a consumer who pays for the fastest broadband speeds available getting high quality access to only some of the internet. That’s not a choice consumers should make. When it comes to both peering and the network neutrality rules that the FCC is considering, ISPs are seeking to use their access to my home to charge everyone, at every point in the network, to deliver content.

This will make them the gatekeepers to content and force consumers into lose-lose situations with regard to picking a broadband provider. The internet isn’t like cable TV. We shouldn’t have to pick from two or perhaps three service providers who have the deals in place to deliver the content we want. Especially if the other alternative is to go with a provider whose service doesn’t even work all the time.

As we’ve said before, the only broadband that matters is the broadband you have access to at your home. In most places, that’s not a competitive market. And with fights over interconnection agreements and the possibility that network neutrality transforms into paying for priority access, consumers get screwed again. Take it from me. Having a bunch of bad choices is like having no choice at all.

  1. I guess the world is evolving as it should?
    Leslie

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    1. Skip Plummer Monday, June 9, 2014

      I guess not.

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      1. We can only wait and see.
        Leslie

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  2. So, I’ve read several of your articles. Other than complaining and b…..ing and moaning, I haven’t seen a single solution offered. What’s your point?!?!

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    1. The solution, at a minimum for peering disputes is more data so we can understand if ISPs are charging fair rates. Ideally, there wouldn’t be a charge beyond figuring out who buys the next server as is done in almost all other cases. But if there has to be a fee, or the FCC decides some kind of fair fee is available, then the process to interconnect should be simple, like as simple as signing up via a website and seeing the port provisioned. There shouldn’t be prolonged negotiations which would hurt small players. And the FCC should keep an eye on the process, because ISPs will use their last mile monopoly to extract whatever concessions it can. Does that feed your need for specificity?

      And in a perfect world, we’d have competitive broadband access at the last mile and this would be moot.

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      1. But, in your own experience, you saw that TWC upgraded the coax in your entire neighborhood to try to handle the increasing load. Any idea what that costs? How can you then say it is a simple as figuring out who buys the next server? As the ISP accepts more and more data into their network, they will need to make more and more of these internal capacity upgrades to deliver it to the end user.

        Maybe there is a case to be made that the ISP’s engaged in false advertising if they led you to believe that they had sufficient internal capacity to actually fill more than a small fraction of your 30 Mbps connection at a sustained rate. But, making that case, doesn’t make the advertised capacity suddenly appear. If someone falsely advertises flying cars, they will get fined, not obligated to bring a flying car to market.

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  3. It doesn’t make sense to me that TWC would need to replace the lines on your street if your Internet speeds are fine but your content speeds are not. That is clearly a network problem, not a coax cable problem.

    The double-dipping that the ISPs are trying to get away with is criminal. Our elected representatives don’t understand technology and don’t seem to be able to grasp the implication of fast lanes and slow lanes. We need to express the issue in terms they understand. $$$.

    I pay my ISP a fee to deliver bits from Internet addresses that I access, including Netflix. We have a contractual agreement. My ISP is now going to charge Netflix for the same bits. The exact same bits that I have already paid them to deliver to me. Bottom line: The ISP has just doubled it’s prices. Netflix will ultimately pass these costs on to the consumer, so this move is a huge price increase for the consumer. The regulators need to understand it in these terms. Prices have just been doubled.

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    1. Go to http://www.fcc.gov/comments and log you response during the open comment period and tell all of your friends and relatives to do the same.

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    2. Telecoms are already getting away with it in the US over the phone bills. Their so called minutes are charged on both sides.
      But you are right this is primarily because technology has outpaced policymakers.

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      1. Ralph Spooner Monday, June 9, 2014

        It has also exceeded capacity between ISPs.

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    3. You completely missed the peering point. Your access is fine. Netflix is producing 30% of the internet’s traffic, and sourcing most of it from one point on the internet. That point is now dumping far more traffic through the choke point that is that network (Cogent)’s connection to other ISPs (Comcast, Verizon, ATT, etc.).

      The connection points between networks (peering points) are always the slowest parts of the internet. To make matters worse, networks that approach capacity degrade badly. Packets get dropped either due to congestion, or errors.

      Netflix has offered to let ISPs host redundant servers for free… of course, ISPs are in the busness of being paid to host servers… and aren’t very receptive to doing it for free.

      There is no reason that Netflix, generating 30% of the internet’s traffic, should not be paying a significant percentage of the bill. I’d be surprised if they were paying 1 thousandth of 1% of the internet’s bill.

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      1. Ralph Spooner Monday, June 9, 2014

        Drengor, you have hit the nail on the head. Even someone with no understanding of how IP traffic works should be able to understand your explanation. Well done. In my mind, their best option would be to put their own hosting servers in the largest metro areas of each state, then build connections to the ISP hubs of each ISP in that area of the state. They could then build dedicated backup routes between each of their own servers. What these companies like Hulu and NetFlix are looking for is priority traffic designation over limited capacity routes and we both know that isn’t going to happen. That would be the fastest way I know for an ISP to lose customers that just want to surf the internet in general, job searching or kids doing homework research. In my local hometown, when the local cable provider started offering cable modems and ISP service, one neighborhood kept complaining about slow service. It turned out that one particular house and IP address was uploading and downloading gigabits of data every day and most of it between 5 pm and 9 pm. The person was running an architectural and engineering design company from his home. He didn’t want to pay for the business class service and therefore bogged everyone else down on the line. When the cable company discovered what was going on, they shut him down until he upgraded to business class service and the city charged him for running an unlicensed business.

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    4. You shouldn’t have to pay more to get access to your IP addresses. But TW, ATT, Comcast etc, built the fast lanes. They invested billions of dollars so that you can watch programming from your TV, your phone, your tablet etc. When one company (Netflix) is so popular that it squeezes the internet so much that is slows down other peoples feeds, than it can pony up cash on the other end to compensate Comcast for the overhead costs associated.

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    5. If I host an email service in my computer and some use it, should my ISP stop billing me because the bits were already paid by the guy using my service?
      If Netflix is connected to an ISP, Netflix becomes customer os such ISP. Why is no gonna pay for it?

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  4. Steve in Boulder Saturday, June 7, 2014

    Good luck figuring this out Stacey. We’ll all be interested in hearing where you go next along with the pros and cons you encounter. I expect many of us will experience this journey in the future.

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  5. In the late 1990s, the deregulation of the California utilities—which forced them to sell off their power supplies to independent electricity wholesalers—proved to be a disaster. The magic hand of the market was supposed to bring down energy fees for all. What happened instead was that “efficient markets” turned out to be nothing of the sort. In 2000, market manipulation, artificial scarcity created by shutting down power plants to reduce supply, and deliberately inferior service resulted in blackouts and brownouts, an 800 percent rise in energy prices, and lucrative profiteering by Enron. Southern California Edison and Pacific Gas and Electric went bankrupt, and the whole crisis cost somewhere upward of $40 billion.

    Electricity wholesalers such as Enron are akin to Internet service providers such as Time Warner and Comcast in important ways. The electricity wholesalers had incentives to starve the energy market in order to extract greater fees from utilities and consumers. ISPs have similar incentives to manipulate their bandwidth in order to extract fees from websites (such as Netflix and YouTube), as well as not build out any infrastructure that would make bandwidth cheaper or make your Internet faster.

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    1. “Electricity wholesalers didn’t invest the cash to build the utility highway”

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    2. A little comment here, BB prices are going down… so I would say the this example works for the ISP companies…

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  6. I think the defining question is, if we had true competition would this behavior exist?

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    1. Great question Mastnosis

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    2. Skip Plummer Monday, June 9, 2014

      A great question.

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  7. Netflix wants a free internet connection…. Umm so do I. Most Fortune 500 companies that are not ISPs, like Netflix’s pay millions for all of the connections they need to the internet. Why would Netflix think they are different? They are not an ISP, therefor peering does not apply. Net flux i complaining that they were getting it for free and now have to pay?

    I’m complaining that they ever received internet for free.

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    1. Theyre already paying Cogent to deliver their data. Cogent and other ISPs have a peering agreement. Bottleneck is between the ISPs. Last mile ISPs wants to charge Netflix for them to upgrade their network since they cant handle the data being passed to them by Cogent supposedly.

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      1. You hit the nail on the head. Netflix is only paying Cogent (before this recent deal with Comcast). None of that money flows to other networks. Peering is based on nearly equivalent traffic going both ways. Now that Netflix is on Cogent, that is broken, and flooding most of Cogent’s peering points.

        Cogent (the absolute worst ISP for peering disputes) is the last (major) ISP on the planet that should be sourcing 30% of the internet’s traffic. Before this last hoopla with Netflix, nearly 80% of the peering disputes involved Cogent. Their CEO has admitted it in interviews…

        “We have had more peering disputes than anyone,” Schaeffer admits.

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    2. Where in the world do you people come up with this?

      You clearly have no clue. Netflix pays lots for their internet connection(s) and they have never sought to have it for free.

      Netflix also offers ISPs to be a part of their OpenConnect program at not cost to them which has great benefits to them AND to the ISPs that are a part of it. It is amazing that only the big ISPs that dominate the markets are the only ones that don’t want to be a part of it. Why? Because they have the subscriber base large that i enough they can use to extort more money out of Netflix like Comcast did.

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  8. As long as business continues to focus on just how much profit they can suck out of people, I don’t see why anyone should subscribe to any service. True, business is there to make money. But what about the service? What about the customer service? What about providing a great product for a REASONABLE cost to everyone? The main problem with just about all business is that they think the monthly bill for their service is the only bill people have to pay. People have other bills which are a lot more important. Rent, food, utilities, gasoline, car insurance. These bills are must haves. You need them in order to live. Cable/satellite tv or internet service are luxuries. They are not must haves. And this is where the majority of common people make the mistake because they view these services as must haves. They are not. Still, I remember a time when you used to walk into a store or business, speak with an intelligent person with a lot of product knowledge, get all of your questions answered, pay for the first month of service and leave feeling good about what you just did. Not like that anymore. Now you call a 1-800 number for support and pray that the person who answers speaks enough English to not only understand what you are saying, but also they speak enough so you can understand them as well. Business as a whole has gone down the toilet years ago. Providers of service and products just keep raising their prices and give you less and less and they want you to be happy about it. I quit cable service about 15 years ago and have never looked back. I quit paid internet service service about 9 years ago. I have built my own equipment and got a hold of some killer software. I can now have an internet connection anywhere I go. I can also watch pretty much whatever I want as well online. And the best part is that I don’t pay a dime for it. I have given enough of my money to these leeches over the years. No more.

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    1. There was a time where electricity was a luxury as well. You didn’t need it to live.

      Now it is considered a necessity and rightly so. We need electricity in our homes to function normally in society.

      Where cable is a luxury, I’m beginning to consider the internet as being closer to a necessity to function normally in society. Look at all of the cord cutters? I cut the cord on cable about a year ago, but I’m still using internet. I would bet that almost all of the “cord cutters” are still paying for internet. The internet is what helps them cut the cord in the first place because it is more affordable to access OTA television, netflix, hulu, etc.

      This in itself doesn’t make internet a necessity, but I use the internet to pay my bills, maintain my accounts, contact customer support, communicate with people far away, communicate with my employer and colleagues, research and learn new things (DIY) that save me lots of money, etc. I’m seeing internet as more of a necessity than not.

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  9. The ISP’s do not want to keep up with technology. They do not want to invest the money it takes to keep up with the demand, so they are starting to complain. If they can not handle the speed demand, they need to get out of the business and give up the monopoly that each have in the area they are doing business

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  10. Netflix already pays for their internet connection. This is about ISP’s trying to double dip. This video will explain what the real issue is.

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    1. Who do they pay?

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